In: Accounting
The following selected transactions were taken from the books of
Ripley Company for Year 1:
On February 1, Year 1, borrowed $47,000 cash from the local bank.
The note had a 5 percent interest rate and was due on June 1, Year
1.
Cash sales for the year amounted to $245,000 plus sales tax at the rate of 6 percent.
Ripley provides a 90-day warranty on the merchandise sold. The warranty expense is estimated to be 4 percent of sales.
Paid the sales tax to the state sales tax agency on $180,000 of the sales.
Paid the note due on June 1 and the related interest.
On November 1, Year 1, borrowed $47,000 cash from the local bank. The note had a 9 percent interest rate and a one-year term to maturity.
Paid $3,700 in warranty repairs.
A customer has filed a lawsuit against Ripley for $130,000 for breach of contract. The company attorney does not believe the suit has merit.
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Prepare the current liabilities section of the balance sheet at
December 31, Year 1. (Round your answers nearest dollar amount.
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Interest Payable | Sales Tax Payable | |||||||
Beg. Bal. | 0 | Beg. Bal. | 0 | |||||
705 | 6 | 14700 | 2 | |||||
4 | 10800 | |||||||
End. Bal. | 705 | End. Bal. | 3900 | |||||
$47000 x 9% x 2/12 = $705 | $245000 x 6% = $14700 | |||||||
$180000 x 6% = $10800 | ||||||||
Warranty Payable | Notes Payable | |||||||
Beg. Bal. | 0 | Beg. Bal. | 0 | |||||
9800 | 3 | 47000 | 1 | |||||
7 | 3700 | 5 | 47000 | 47000 | 6 | |||
End. Bal. | 6100 | End. Bal. | 47000 | |||||
$245000 x 4% = $9800 |
Note: Kindly re-confirm transaction numbers given in the t-accounts since the transactions provided in the question have not been numbered.
RIPLEY COMPANY | |
Balance Sheet (Partial) | |
As of December 31, Year 1 | |
Current Liabilities | |
Interest payable | 705 |
Sales tax payable | 3900 |
Warranty payable | 6100 |
Notes payable | 47000 |
Total Current Liabilities | 57705 |
The lawsuit filed against Ripley by a customer for $130000 for breach of contract should not be recorded since it is a contingent liability with probability of its occurrence being remote as the attorney believes the suit does not have merit.